Ladbrokes PLC

Potentially a new gbp retail bond - road show this week Lloyds/Canaccord...


  • Depending upon the coupon and bond length, this could be a good one to invest in. They have a good brand name, lots of betting shops containing 4 FOBTs each and the online business as well. All in all, a very secure company, I'd say. While the government increased the taxation of FOBTs recently, there has to be some possibility that they will compensate them by allowing them to have 5 or 6 per shop at some stage. They are great cash cows for both the bookmakers and the government!
  • Looks like the yield will be somewhere in the middle of the other Orb bonds due in 2022 which to my untrained eye seems fair. I'm guessing this is viewed as a better credit risk than Paragon or Enquest.

    Paragon 6.125 yields 5.6% to maturity at a price of 103.17
    Enquest 5.5 yields 5.45%
    A2D 4.75 yields 3.9%

    I just worry about rising interest rates and whether there will be a better opportunity to buy these bonds in the future. However in the meantime 5%+ is fine as long as rates don't move up quicker than expected
  • Anyone any idea of size of issue - couldn't see any numbers at first look.
  • You can place an online order with Selftrade already !
  • Here is a bit more info. Looks like these may have a credit rating of BB which is slightly higher than the B rating given to the recent Enquest $ bond which presumably would also apply to the Enquest Orb bond. Clearly we are not in investment grade territory here and looking at historic default rates of BB bonds makes me a little nervous

    The only comparable recent issue was Paragon in January at 6.125% and currently yields 5.6%. I'm struggling to work out whether Ladbrokes offers a great deal more security for the lower yield and I guess we will have to wait for people more knowledgeable than me to run the numbers.

    I've participated in most retail bond issues over the last few years and all have done well, but I'm now starting to seriously question the risk and returns going forward.

    Issuer: Ladbrokes Group Finance plc
    Guarantor: Ladbrokes plc
    Coupon: 5.125%
    Format: Senior Unsecured, Unsubordinated
    Maturity date: 16 September 2022 (8.25 years)
    Interest payments: Semi-annual - short first coupon (to 16 September 2014)
    Bond Rating (Exp.): BB / BB (S&P/Fitch, both stable)
    Key features of the bond: Please also refer to pages 5 and 6 of the Information Booklet as well as the relevant pages of the Prospectus
    Shares ISA / SIPP eligible: Yes
    Minimum Denomination: £100*
    Listing: Expected to be LSE Order Book for Retail Bonds (ORB) from 16 June 2014
  • I'm not keen on the combination of length & coupon size. I might make a minimal purchase.
  • Like other members of this forum, I do have concerns regarding this issue, particular the coupon rate compared to the company risk profile.

    The coupon rate is not particularly attractive at 5.125%, in particular as interest rates are likely to move upwards sooner (late 2014?), than earlier forecasted.

    My main concerns
    • High rate of dividends paid compared to net earnings (last 3 years)
    (Oliver, Can these be curtailed?)
    • High Director incentives for miserable results (see 2011 Performance Share Plan)
    • Goodwill & Intangible Assets, £486m Licences (no depreciation) in balance sheet
    • Total Goodwill £770.7m higher than Shareholder value @ £428.3m, reduced by further £42m for 2013 dividend
    • Net Worth therefore , excluding goodwill is a large £343.4m negative (£428.3m less £770.7m)
    • High Fixed Costs (Premises & Labour)
    • Very competitive industry
    • Rollover of 2017 bond
    • Priority of future £75 million lending on secured assets

    Plus Points
    • Very large business, Turnover over £1 billion, Employees 14,763 (nos)
    • Long established & well known

    Building on “Firm Foundations”, front page of the 2013 Annual report, but how firm? (Showing a racehorse, which could one day be in dry firm conditions, the next day on very wet slippery ground!)

    Look forward to Oliver’s comments on this issue before deciding any investment (unlikely to be my usual quota (more likely under 50%), compared to other issues in 2012 & 2013.

  • Investors Chronicle have recently highlighted concern about how firms profits in the sector will cope in the tougher times ahead. Ladbrokes has already given notice that some betting shops will have to close. There also seems to remain considerable uncertainty about how all the new taxes will bite, so very difficult to determine the extent of the profit detriment.

    I am left with the feeling that this is a risky bet. I won't be rushing in.
  • Not for me. Anything under 6.5% not worth buying into. Base rate will be 3% in three years time. Time to sell retail bonds and buy back lower in six months time
  • Just of additional interest, their payment history terms to suppliers is 40 days beyond terms (DBT), their industry is normally around 20 DBT, therefore some reluctance to depart with their money!
    Ladbrokes PLC Company Secretarial department also has not been too clever, in not ensuring that CCJ (county court judgements) are dealt with, before becoming public knowledge.
    7 unsatisfied CCJs last 24 months (total £106K), with 4 in 2014, most recently on 23rd April 2014 for £95,349.
    Very few other ORB 2012 & 2013 bond issuers have that many CCJs issued against them. Perhaps their size of operation makes them more likely.
    Not a big concern due to their size,
  • Got rather carried away with the Bond of Week Oliver, did you write it after a night on the sauce with Rev Flowers?
  • Oliver - another excellent and informative article - please do not change your style, it is a refreshing change
  • Good work, Oliver and thank you.

    Not sure all your articles require quite this degree of originality! But a welcome breath of fresh air, nonetheless.

    Interesting to note the drop in price of several retail bond issues since late May, when this issue was first announced. I wonder to what extent this can be put down to the freeing up of funds for reinvestment at par here?
  • apparently its closed!! at least with Barclays - never saw the early closing information.
  • Yes - I just got in under the wire with this one. But talk now of scaling back allocations. Anyone any news/idea what allocations will be or when details will be announced?
  • Sorry if I worried anyone - just been advised by broker that applications filled in full.
  • The ticker code is LAD2
    A few trades today, well above par price
    6:23:43 101.80 20,000 20,360.00
    16:22:44 101.80 20,000 20,360.00
    16:22:44 101.80 20,000 20,360.00
    16:15:23 101.90 40,000 40,760.00

    Hopefully this will encourage further issues
  • I'm getting tempted in by the recent decline in price. They are merging with Corals. If this goes through there will be lots of cost cutting etc and the resulting combined entity might have a more secure footing. While neither Ladbrokes or Coral have a good reputation in terms of risk taking (Too defensive at account closures rather than taking the punters on), their large established client base and huge number of shops (4000) with 4 FOBTs each leads me to think that this investment has a decent risk-reward profile. I am considering "smashing it off the boards" shortly!
  • Out of the blue, I know, but a quick FYI / alert:

    LADLN 5.125% 09/22 Sr Unsec (retail bond) quoted at 100.8 / 102.25 (4.95% / 4.66%)

    Yet, for various reasons, the institutional bonds (maturity one yr further out) have traded down meaningfully over the past 2wks:
    LADLN 5.125% 09/23 Sr Unsec (inst. bond) quoted at 95 / 95.625 (6.06% / 5.94%)

    Full disclosure: I am not invested in these bonds.
  • edited February 2017
    Bet-to-view ban from ATR courses hits bookies

    BY BILL BARBER 7:09PM 31 JAN 2017

    LADBROKES and Coral have been told they will no longer be able to provide a bet-to-view service from all 22 tracks covered by At The Races as the stand-off over betting shop pictures escalates.
    The dispute has been running since the start of the year when new betting shop channel The Racing Partnership (TRP) took over the broadcast of pictures from six Arena Racing Company tracks - Doncaster, Lingfield, Southwell, Windsor, Wolverhampton and Worcester.
    While William Hill, Paddy Power and a number of independents have taken the service, Ladbrokes, Coral and Betfred have not.
    Legal proceedings have been started
    TRP has already started legal proceedings claiming misuse of data and also over the use of unofficial commentaries in Ladbrokes and Coral betting shops.
    Now the Racing Post understands Ladbrokes and Coral have been informed they are no longer licensed to provide online streaming of races from ATR tracks.
    The service is provided by ATR, in which Arc is a major shareholder.
    No British racing was available in Betfred, Coral and Ladbrokes betting shops yesterday, with Lingfield, Southwell and Wolverhampton all falling under the TRP banner.
    Escalation of hostilities
    Arc has also ordered Ladbrokes to close their betting shops at the six TRP courses involved in another escalation of hostilities. Racegoers at Southwell yesterday were not happy that the course betting shop had been closed.
    Geoff Archer, from Leicester, said: "It's bad news that the shop is shut and I think it'll have an effect on the crowd. A lot of people like to watch the other racing or have a bet on the dogs between racing.
    "Roy McDonald, from Bolsover, said the situation was "disgusting".
    He went on: "You come here and you want to have a bet on the other meeting and you're left standing like a lemon. It's a big loss and it makes me much less likely to come racing - and if you look round, there seem to be fewer people here today."
    Cutting out the leakage
    TRP was set up in December 2015 to sell media rights direct to bookmakers in an attempt to cut out the ‘leakage' of funds to bodies outside the sport.
    It represents the 15 tracks owned by Arc and seven independent racecourses - Fakenham, Ffos Las, Hexham, Newton Abbot, Plumpton, Ripon and Towcester. Coverage from the 16 courses not yet involved will switch from SIS to TRP from January 1 next year.
  • Good start for newly merged Ladbrokes-Coral

    BY BILL BARBER 10:55AM 22 JAN 2017
    THE newly merged Ladbrokes Coral group have got off to a positive start despite a poor run of sporting results in December.
    Giving a trading update last week, the group as a whole reported a £280 million profit for 2016, £179m of which came from Coral and £101m from Ladbrokes. That compared to a £235m profit in 2015.
    Ladbrokes and Coral leapfrogged William Hill to become Britain's biggest betting-shop operator, with an estate numbering more than 3,500 shops when the two completed a £2.3 billion merger in November.
    Chief executive Jim Mullen said: "The last quarter of 2016 was one of significant activity with the completion of the merger, good progress on integration along with the necessary shop disposals, and a busy sporting schedule.
    "While the sporting gods didn't look favourably on us in the period, it is pleasing to report the business continued to perform well and that our full-year numbers will be in-line with expectations."
    Final results for the year will be announced in late March but the update was well received in the City, coming after Hills the previous week revised their forecast profits after a run of punter-friendly results in December which cost the firm £20m.
    Investment analysts Davy said: "As opening statements go, this first update from the merged Ladbrokes Coral entity is pretty encouraging."
    Terms and conditions under the microscope
    Further scrutiny of bookmakers' terms and conditions was a feature of last week.
    The Competition and Markets Authority is extending its investigation into online gambling to include the treatment of punters in relation to free bet promotions.
    Concerns raised by the Gambling Commission about potential breaches of consumer law led to the CMA launching its probe last October.
    In its latest update, the CMA revealed the scope of its assessment of the online gambling landscape is to be increased.
    A statement said: "When the CMA launched its investigation in October 2016, we asked consumers to provide further information and evidence on the concerns we'd highlighted.
    "In light of the information provided, we wrote to certain additional operators and are now also requesting information on certain issues relating to free bet promotions.
    "We're particularly concerned about information we've received suggesting players may be placing sports bets, which according to the terms of a promotion qualify them for a free bet, only later to be told they're not eligible for the promotion."
    Meanwhile a Glasgow gambler has branded Coral as "cheats" for refusing to pay him £250,000 on a bet that Glasgow Rangers would be "relegated" in 2012.
    Top flight Rangers went into administration and began the next season in Scottish Division Three. However, Coral refused to pay out on the bet, leading to the court case.
    The three-day hearing has left Scotland's highest civil court wrestling with the meaning of the word "relegation".
    Kinloch's team have cited the "common sense dictionary definition", to move down to a lower league. Counsel for Coral insist that relegation only applies to the teams who come last on points and anything else is "demotion".
    The presiding judge will retire to consider his verdict, which is expected to take around three weeks.
    Bad news for Gibraltar tax challenge
    A challenge to the government's point of consumption tax regime for gambling has been dealt a blow in Europe.
    The Gibraltar Betting and Gaming Association argued the regime, which came into force in December 2014, impeded cross-border trade, contrary to article 56 of the Treaty on the Functioning of the European Union.
    However, advocate general Maciej Szpunar, whose job is to assist judges by presenting a legal opinion on the cases assigned to them, said the UK and Gibraltar should be considered as a single member state and that the UK gambling duty does not restrict the free movement of services.
    That opinion is not binding on the CJEU though, which will still issue its judgement on the issues, a judgement which will be binding on the high court.
    TRP issue legal proceedings
    New betting-shop channel The Racing Partnership (TRP) has issued legal proceedings against the major high street bookmakers who have yet to sign up to its service over claims the firms are misusing their data, the Racing Post understands.
    Two claims have been made in the High Court of Justice Chancery Division, one against Coral, Ladbrokes and Ladbrokes-Coral Group plc, and another against Betfred and SIS.
    All sides were asked for comment but declined.
    From the start of this year pictures from six courses - Doncaster, Lingfield, Southwell, Windsor, Wolverhampton and Worcester - have been seen only in betting shops whose owners have done a deal with TRP, which represents the 15 Arena Racing Company courses and seven independents.
    As a result of the impasse, the three major high street firms involved have sought other ways of providing a service to their customers, including offtube commentaries. It is understood the legality of those is also being examined by TRP.
    Despite the issuing of legal proceedings, it is said that talks aimed at bringing the other firms onboard are ongoing.
  • Possible takeover by GVC, seems positive news for the bonds.
  • These are trading very high right now. Anyone tempted to cash some in? This one happens to be my biggest holding of retail bonds. I can't imagine why people would buy at the current rates, with such a low yield.
  • Yup - flogged all mine last Friday !!

  • I've got a large amount of 54OU LADBROKES GROUP FINANCE PLC 5.125% GTD NTS 08/09/23. Since I haven't found a home for all the Tesco tender cash yet, I will hold on.
  • Sold a good chunk at ca. 111p. I was fortunate enough to buy some of those under £1 too! As always, where to put the money is the tricky question now.
  • Thanks for the nudge shotgun. It's so easy to forget to check on current prices of bonds (unlike equities where price info is easier to track - at least for me). So I just sold all my 2022 LAD2 @ 111.33 which I make a YTM of 2.538%. Surely I must be able to do better than that somewhere?
  • My feelings exactly. The dilemma now is whether to take more risk with a greater proportion of equities, with these heady valuations. I have a smaller, somewhat tempting proposition with my Tesco bonds, where the current prices would allow a ca. 22% profit. However, with 11 years to run on that one, I am not sure of what is best to do with that. I should probably cash it in.
    We invest in these retail bonds for a largely secure, a bit over inflation returns. Yet each time you sell something, you can be tempted to take more risk with the proceeds. In the past, we would have been investing towards an annuity type investment scenario at ca. 60-65. Now, perhaps we ought to be thinking of a more "whole life" scenario, where our investment targets are more aimed towards an age of 75-80. With a longer period involved, perhaps we should be nudging our equity proportions upwards.
    The economy is much harder to read, now it has been completely distorted with zirp/QE etc. The unwinding of this surely has to come some day?
  • btw, although the portfolio part of the lse website is pretty dire, you can certainly add retail bonds into your portfolio & maybe some of the other related investments too.
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